National Association of Home Builders Discusses Economics and Housing Policy

Falling Gas Prices Push CPI Down

In October, consumer prices decreased 0.1% on a seasonally adjusted month-over-month basis according to data released by the Bureau of Labor Statistics (BLS). Over the past twelve months, prices on expenditures made by urban consumers increased 1.0% before seasonal adjustments.

The month-over-month decrease in the all items index was the result of a 1.7% decrease in the energy price index. The energy price index has been volatile over the last two years, increasing month-over-month in September by 0.8% following a 0.3% month-over-month decrease in August.

The gasoline index experienced the largest month-over-month decrease of all components of the energy price index at 2.9%. The index for natural gas also experienced a drop of 1.0% after increasing 1.8% month-over-month in September.

In October, core CPI, which excludes more volatile food and energy prices, rose by 0.1% month-over-month for the third consecutive month. Over the past twelve months core CPI increased by 1.7%.

The shelter index rose 0.1% month-over-month in October after increasing 0.2% month-over-month in September. Over the past twelve months, the shelter index increased 2.3% before seasonal adjustments.

NAHB constructs a real price index by deflating the price index for rent by the index for overall inflation. This measure indicates whether inflation in rents is faster or slower than general inflation and provides insight into the supply and demand conditions for rental housing, after controlling for overall inflation. When rents are rising faster (slower) than general inflation the real rent index rises (declines).

The real rent index has increased for nine consecutive months. In October, the real rent index rose by 0.1% month-over-month. Over the past year, real rental prices have risen by 1.1%.

Because shelter costs represent a large share of the average consumer’s expenditure’s, it is worth exploring the real rent index by region. In October, month-over-month, the real rent index rose by 0.1% in the South and West regions. The month-over-month increase in the Northeast and Midwest regions was 0.2%. Over the past year, real rental prices increased the most in the West by 1.6%.